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Leadership in Tax Competition with Fiscal Equalization Transfers

Author

Listed:
  • Haraguchi Junichi

    (Faculty of Economics, Kanagawa University, 3-27-1, Rokkakubashi, Kanagawa-ku Yokohama, Kanagawa, 221-8686, Japan)

  • Ogawa Hikaru

    (Graduate School of Economics and Graduate School of Public Policy, University of Tokyo, 7-3-1 Hongo Bunkyo-ku, Tokyo, 113-0033, Japan)

Abstract

We propose a timing game of asymmetric tax competition with fiscal equalization scheme. The study finds that governments tend to play a sequential-move game as the scale of equalization transfer increases, which explains the emergence of tax leaders in tax competition. The presence of a tax leader is likely to exacerbate capital misallocation among countries, suggesting that equalization transfers aimed at narrowing the interregional fiscal gap might cause an inefficient capital allocation.

Suggested Citation

  • Haraguchi Junichi & Ogawa Hikaru, 2018. "Leadership in Tax Competition with Fiscal Equalization Transfers," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 18(3), pages 1-15, July.
    • Handle: RePEc:bpj:bejeap:v:18:y:2018:i:3:p:15:n:3
    DOI: 10.1515/bejeap-2017-0217
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    Cited by:

    1. Kawachi, Keisuke & Ogawa, Hikaru & Susa, Taiki, 2020. "Endogenous capital supply and equilibrium leadership in tax competition," International Review of Economics & Finance, Elsevier, vol. 70(C), pages 622-634.

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    More about this item

    Keywords

    endogenous timing; equalizationtransfers; leadership; tax competition;
    All these keywords.

    JEL classification:

    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods

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